Hello,

We are seeing reports of fraudulent treasury checks and in some cases fraudulent ACH credits. It seems bad actors are filing amended returns which aren't verified as timely but refunds are sent out via check or ACH. The checks are valid and pass the TCVS. In some cases the bad actors are paying a vulnerable victim for their PII and tax info, file the return and then send them to the bank to deposit the check once it comes.

My question comes from when the treasury realizes the issue and tries to reclaim the money. I read that checks drawn on the US Treasury are excluded from Reg CC.

How long does the treasury have to return a check to the bank of first deposit? Does liability shift for counterfeit vs non counterfeit treasury checks? Is the BOFD liable for checks that are valid but based on a fraudulently filed tax return? I understand that question seems weird because the check really isn't valid if its based on a fraudulent return but it seems there is a vulnerability at the IRS and until that gets fixed there could be added risk to FIs who accept them.

Is the BOFD liable for checks that are valid but based on a fraudulently filed tax return?

No. That is an issue for the IRS to solve with whoever the perpetrator might be.

Thanks. I'm more so asking from a return standpoint. Do US Treasury checks need to be returned by the midnight rule? Can they be returned late? Could there be a breach of warranty claim?

Treasury checks can come back later, just like any other check. But not if you paid it to the named payee and the check itself was not a forgery. If the check was actually issued by the treasury and was not altered, they cannot just return it because they were duped.

Wouldn't checks claiming forged endorsements be subject to Gold Book rules? This would give the Treasury 1 1/2 years to return the item leaving the FI on the hook to recovery from the depositor or take a loss if funds aren't available.

I also wonder how they digital altered items would be treated for those of us receiving these items via RDC or Mobile deposit? Is that just a risk we should be considering when accepting these items?

Yes, they can come back, but not because a fraudulent tax return had been filed.